Alberta appoints a coal phase out negotiator, picks a fight Alberta appoints a coal phase out negotiator, picks a fight with power contract holders
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Geoffrey Morgan
Wednesday, Mar. 16, 2016
Economic Development and Trade Minister Deron Bilous said at a press conference Wednesday that power companies in Alberta were exploiting “loopholes” in the power market. David Bloom
CALGARY – The Alberta government is gearing up for a fight with the province’s power industry at the same time as it appointed a negotiator Wednesday to develop terms for a coal-fired power phase.
Economic Development and Trade Minister Deron Bilous said at a press conference Wednesday that power companies in Alberta were exploiting “loopholes” in the power market. He said the government is reviewing whether not companies that have handed their money-losing contracts to purchase coal-fired power over to the provincially owned Balancing Pool had a legal right to do so.
“During the tenure of the former government, they negotiated power purchase agreements that, quite frankly, were not in the best interests of Albertans. There are loopholes in those agreements that allowed companies to reap the benefits when electricity prices are high and hand all the risk back to taxpayers when the market is low,” Bilous said.
“Some are doing that now and claiming it’s because of our climate leadership plan. The reality is that coal is not very profitable right now.”
On March 7, TransCanada Corp. and AltaGas Ltd. handed their contracts to purchase coal-fired electricity over to a provincial agency called the Balancing Pool, citing a change in the law as their legal reason for exiting the contracts.
“The rules are clear and were established back when these PPAs were first auctioned off and bought by TransCanada, over a decade ago,” TransCanada spokesman Mark Cooper said in an email.
Electricity prices have fallen sharply in Alberta and natural gas prices have fallen to levels where analysts say it is now cheaper to generate electricity from gas, especially when the government taxes carbon emissions.
Calgary’s city-owned utility company Enmax Corp. also handed its power purchase agreement (PPA) for coal power over to the Balancing Pool in December. The Balancing Pool subsequently sent Enmax a letter confirming the transfer of the agreement.
“Our decision to terminate the Battle River Power Purchase Arrangement was not taken lightly. It was based on a combination of lower forward market prices and the June 2015 increases in the carbon emissions costs under the Specified Gas Emitters Regulation,” wrote Enmax spokeswoman Doris Kaufmann Woodcock in an email. “After undertaking a review of the matter, as is required by the Balancing Pool Regulation, the Balancing Pool confirmed to us in late January that we were entitled to terminate the Battle River Power Purchase Arrangement in accordance with the terms of the PPA.”
Progressive Conservative energy critic Rick Fraser rejected Bilous’ assertion, saying, “These companies come in good faith and built the huge infrastructure projects it takes to provide power.” Fraser added that Albertans would see higher power bills as a result of the new climate change policies.
Despite low electricity prices in Alberta, many industry observers say the province’s climate change policies — including the requirement that carbon emissions be taxed at $30 per tonne beginning in 2017 — were interpreted as a change in law, giving power companies the legal ability to exit their contracts.
“That dealt the card to the PPA holders that they are now playing,” said Gary Reynolds, who was CEO of the Balancing Pool between 2003 and 2011.
“The people (who are) going to be picking up the losses on that are Albertans and not the PPA buyers,” Reynolds said. “The impact on consumers could be very significant.”
“We are in the process of reviewing the structure quite closely to ensure that we’re doing everything in our power to protect consumers and taxpayers,” Bilous said.
Bilous also announced the government had picked Terry Boston, the former president and CEO of Pennsylvania-based power giant PJM Interconnection, to negotiate a settlement with companies like TransAlta Corp. and Capital Power Corp. for the government’s plan to phase out coal-fired power generation by 2030.
“Alberta has an opportunity to demonstrate its leadership and provide an example to other jurisdictions as coal-fired electricity emissions are phased-out around North America,” Boston said in a release.
“We look forward to working with Mr. Boston as he develops a coal phase-out plan that maintains grid reliability, delivers stable electricity prices and is fair to affected companies, communities and workers,” Capital Power vice-president of external affairs Martin Kennedy said in an email.
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